The long-awaited housing bailout bill, which President Bush signed into law last week, takes a bold step toward clamping down on fraud and abuse in the troubled mortgage industry by mandating that all loan originators be licensed and follow strict standards.
Up until now, he said, in some states anyone could become a mortgage broker or loan originator without a background check or formal training.
The Mortgage Bankers Association in
Under the legislation, a nationwide mortgage licensing system and registry will be set up to oversee and track all loan originators to ensure that they follow educational, ethical and legal requirements, and those who hold Series 7 licenses won’t be exempt from the requirements.
All prospective loan originators must also complete at least 20 hours of education, which includes courses on federal law, ethics, fraud, consumer protection, fair lending and non-traditional mortgages.
The new law also requires that licensed loan originators take at least eight hours of continuing-education courses each year to maintain their license. The education requirement could mean big business for a number of mortgage organizations, including the Certified Mortgage Planning Specialist Institute, the Mortgage Bankers Association and the National Association of Mortgage Brokers, which offer various education and certification programs.
Longtime mortgage brokers, annoyed that their reputations were being soiled, sought out certification programs through these mortgage organizations to differentiate themselves from the scammers.
Until now, standards have varied from state to state on how much education and training a loan originator needed to get a license. "It imposes a bit more regulation on people who originate mortgages."